FSD Pharma: A Cannabis Penny Stock on the Cusp of Stardom

FSD Pharma Inc

FSD Pharma Inc (OTCMKTS:FSDDF, CNSX:HUGE) is one of those cannabis companies that has been operating quietly in the background, getting everything it needs to become one of the largest dried cannabis producers in Canada, which right now also means the world.

A licensed producer of marijuana under the Access to Cannabis for Medical Purposes Regulations (ACMPR), FSD hopes to receive its sales license and be operational in the first quarter of 2019. That would finally put the company on the cannabis map.

Going forward, management said it expects to move 75%–80% of the company’s business into biotechnology, since it believes that medicinal biotech is the most lucrative space in the cannabis industry.

FSD Pharma Stock

While many investors may not have heard of the company, HUGE stock is actually one of the most actively traded stocks in Canada.

Expansion Plans: 400 Million Grams of Dried Cannabis Flower Annually

The company’s wholly-owned subsidiary, FV Pharma Inc., is a licensed producer of marijuana, having received its cultivation license in October 2017. (Source: “About FSD Pharma,” FSD Pharma Inc, last accessed February 7, 2019.)

FSD Pharma first garnered attention when it announced that it purchased a former Kraft Heinz Co (NASDAQ:KHC) plant in Cobourg, with plans to turn it into a multi-million-square-foot medical marijuana facility. (Source: “FSD Pharma Stock Appears to Have Enormous Potential,” FSD Pharma Inc, July 20, 2018.)

It was expected to be completed and operational in the first quarter of 2019, with cultivation expected to start in the first half of 2019.

Details of the expansion plans include the following:

Phase 2 expansion will result in up to 820,000 square feet of production space.

At full capacity, the facility will be able to produce 400 million grams of dried cannabis flower annually.

Sales will target all legal avenues of the cannabis industry: cultivation, processing, manufacturing, extracts, and research & development.

The plant has its own electrical substation, natural gas lines, multiple water intakes, rail lines directly into the facility, and 26 loading docks.

(Source: Ibid.)

Positive 2018 Q3 Results

At the end of November 2018, FSD Pharma announced its third-quarter financial results. Highlights include:

“Our strong balance sheet affords us the luxury of being able to ensure success as we transform the company into a renowned leader in the cannabinoid pharmaceutical space, while building out the largest indoor cultivation facility in the world,” said Zeeshan Saeed, president and founder of FSD Pharma. (Source: Ibid.)

After the 2018 Third Quarter

Since the end of 2018 Q3, which ended September 30, FSD Pharma has made a number of major announcements.

Having a cannabis license is necessary to sell marijuana, and is a prerequisite of obtaining a sales license under the Cannabis Act.

In November, the company announced that FV Pharma Inc. was now able to sell cannabis to other licensed producers.

FV Pharma Inc CEO Thomas Fairfull said the following:

The migration of the company’s license, with the ability to sell under subsection 11(5) of the Cannabis Regulations, along with the recent addition of grow and operation areas to its existing license, brings the Company to the verge of readiness for a pre-sale inspection and obtaining of a full sales license from Health Canada.

The pre-sales license inspection is the last step prior to the issuance of a sales license in Canada. Saeed stated:

With the completion of analytical testing and the recent addition of grow rooms to our license, we are now positioned to submit our readiness report for a pre-sale inspection, while at the same time being able to continuously cultivate and harvest all existing licensed space so as to maximize supply to the medicinal and recreational markets.

(Source: Ibid.)

Analyst Take

There’s a lot of growing interest in HUGE stock. FSD Pharma has the properties and infrastructure in place to build the largest indoor cultivation facility in the world.

The company also successfully passed its analytical testing and is now waiting for its Canadian sales license. If that is approved, FSD will get into the supply business, which is where the real money is. The stock would also then jump onto Wall Street’s radar.

Until FSD Pharma gets its sales license, investors can take solace in knowing that the company is sitting on a pile of cash and has no long-term debt. Those are the kinds of fundamentals you like to see when a company is waiting for the green light.